Profit, people and the value chain

Journalists and other role-players recently visited Pieter Graaff, the Agricultural Writers’ 2018 farmer of the year, and toured his farms in the Ceres region of the Western Cape.

“Profit is what makes business sustainable and is the obvious goal of any successful farming enterprise,” Graaff says during a visit to his farm Die Eike, situated in the Western Cape’s Ceres Valley. “Cash flow is critical and too many farmers are overgeared, which is not good business.” Graaff, who started farming in his early twenties, is now the single, largest individual apple producer in South Africa.

Off a base of 220ha of orchards, using business-generated profit and keeping the gearing low, Graaff expanded regionally, acquiring and developing properties at varying altitudes in different climatic zones. His operation, Witzenberg Properties, now consists of six farming units, all within 25km of the head office in Ceres. The farms operate independently while enjoying the benefits of scale.

While 60% of farm income is derived from apples and pears from 1 200ha of orchards, the business has a robust element of diversity with 300ha of timber, a sawmill, 25ha of wine grapes, 1 000ha of grain, 150 Angus stud cattle, 40 to 100ha of onions, 1 000 Merino ewes and a thoroughbred horse stud with 62 broodmares and two stallions.

A price maker
It is often said that farmers are doomed to remain price takers, with farm product prices dictated by the markets, or by buyers, processors, exporters and large supermarket groups. They are generally not part of that key component of profit that is to be found in the value chain after the product has left the farm. Graaff has laid claim to this value chain to a remarkable degree, and therefore equally so to the profits.

The fruit from the Witzenberg orchards goes to the Ceres Fruit Growers (CFG) packhouse, a farmer-owned facility in Ceres which runs along the lines of a farmers co-op. “Once the infrastructure has been maintained and salaries have been paid, the profit goes to the farmers,” says Francois Malan, managing director of CFG, who oversees the handling of 120 000 tons of fruit a year.

Two-a-Day, the fruit packers from Elgin, another farmer-owned packhouse, and CFG jointly own the marketing and distribution company Tru- Cape, the largest marketer of apples and pears for export in South Africa. Witzenberg fruit bins, manufactured at the Witzenberg timber mill, are used to carry fruit from the orchards to the packhouse.

“Our aim is to extract maximum value for our product from the market,” says Graaff. Keeping a hand on the value chain rudder like this gives him a competitive edge that could find Witzenberg fruit in Johannesburg on offer for less than the Johannesburg market prices.

There are benefits for smaller growers who want to piggyback off the economies of scale offered by CFG and Tru-Cape. This model offers clear advantages to farmers in the unfortunate (but not unlikely) event that they have crop production problems; their continuity of supply is assured and there is no loss of market share.

Job creation
Graaff’s focus on profit in no way detracts from his humanity, his awareness of the surrounding communities or his sense of social responsibility. “It is our responsibility to create jobs,” he says, “for without jobs, people are stripped of their dignity. And where there is no dignity, there is anarchy.” Witzenberg Properties employs 1 000 permanent staff; a number that may rise to 1 700 during the season, according to Witzenberg Properties’ chief financial officer, Nico Verhoef.

Pieter Graaff is a serious man, intent on his purpose. He is serious about doing his job properly and serious about taking responsibility for the life he leads. “I put everything back into my business,” he says, as he makes a call for others to invest. “We’ve got to invest to create the confidence and the environment we need in our country.”

He speaks perhaps of a range of investments, across a spectrum that embraces detail and concept, people and place, time and money, present and future. – Nan Smith, AgriOrbit

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